Cross-Sector Implications of Canadian Bank Capital Relief

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Cross-Sector Implications of Canadian Bank Capital Relief

Canada | Banks EquityJuneResearch22, 2026

Figure 1 - ... And Unlock ~$1.1T in LendingCross-Sector Implications of Canadian Bank

Capital Relief CapacityImpact of DSB change on lending capacity ($B)

RWA Released $673

RWA as a % of loans 60%There will be no immediate impact on the banks' balance sheets from the

. Loan equivalent $1,122

reduction in the DSB as the banks currently hold significant excess capital, and Source: Company data, OSFI, Jefferies

we see no evidence of major projects going unfunded. However, the key is that Figure 2 - Excess Capital at Various Regulatory

the upper range of OSFI's bound also decreased, meaning that the DSB will not Capital Floors

increase for 3-5 years. This is about opening up more lending capacity as the $16,000$14,000

government begins to execute on its infrastructure growth strategy. $12,000$10,000

$8,000

$6,000

As discussed in our report, "OSFI Cuts Capital Requirement for Banks," published June 19, the $4,000$2,000

Canadian regulator has reduced the domestic stability buffer by 50bps and has capped the upper $0 BMO BNS CM NA RY TD

end of its range to this new level, implying that it will not be raised again for several years. This 12.5% 12.0%

.

capital relief generates an even greater amount of excess capital that we believe the government is Source: Company reports, Jefferies

hoping will be diverted into funding Mark Carney's plans to build out Canada's infrastructure which

aims to improve Canada's ability to grow and export goods. Further, we speculate that the banks

felt that OSFI went too far in its pursuit of prudence and was making the Canadian banks' lending

significantly less competitive, particularly in resource development.